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UK Court Rules In Favour of Process and Industrial Development Limited (P&ID) To Seize $9bn FGN Assets.

UK Court Rules In Favour of Process and Industrial Development Limited (P&ID) To Seize $9bn FGN Assets.

Sep 6, 2019 - Blog by

An English Court on 16th August 2019 gave a ruling against the Federal Government of Nigeria to the tune of 9bn USD of FGN Assets. This judgment was delivered in London in favour of Process and Industrial Development Limited (P&ID).

The background of this dispute is predicated on a 20 years Gas Supply and Processing Agreement (GSPA) entered into in 2010 between the Federal Government of Nigeria (through the Ministry of Petroleum Resources) and P&ID in respect of an accelerated gas development project in Nigeria’s Oil Mining Lease (OMLs) 67 and 123. By reference to the arbitration clause in the contract, P&ID initiated arbitration proceedings against Nigeria in 2012 after a failed attempt at reaching a negotiated deal with the Nigerian Government.

Brief Contract History:

As evidenced in the Agreement, the Contract was designed to last for 20 years. P&ID was to construct facilities required to refine Nigeria’s Associated Natural Gas (wet Gas) into Non-associated Natural Gas (lean gas), which will be used to power the electric grid in the country to generate electricity. The Contract stipulated that in refining wet gas into lean gas, the wet gas will be stripped of concentrated hydrocarbon referred to as Natural Gas Liquid (NGLs) which ultimately impedes the suitability of wet gas for electricity generation. Given that position, it was stated that P&ID would not be paid however, as a measure of compensation, they were allowed to retain the stripped NGLs as their compensation and income for the project. Also, the agreement provided that Nigeria would supply P&ID 400 million standards cubic feet of wet gas for 20 years while construction of the facility was ongoing.

History of the Tribunal Proceedings:

P&ID alleged failure of performance on the part of Nigeria to complete construction of necessary infrastructure, needed to transport the wet gas to their operation base in Calabar, Cross Rivers State (the Adanga gas pipeline) which was the main cause of dispute leading to the Arbitration proceedings. A tribunal was set up in London under the rules of Arbitration and Conciliation Act, Cap A18, LFN 2004. In Her defence, representatives of the FGN held their defence on the background of non-performance on the part of P&ID they insisted that P&ID neither built any Gas Processing Facility neither did it acquire ownership of the designated site for the project from the Government of Cross Rivers State. On the other hand, however, P&ID insisted they incurred about $40 Million in preliminary expenditures.

The Arbitral panel jettisoned the defence of FGN, stating that no clause in the Agreement provided that Government obligation was conditional upon P&ID building the GPF; the Tribunal also left a lacuna when it failed to state whether or not P&ID’s obligation was conditional upon the Government of Nigeria performing its duties under the contract.

Amongst its findings, the Tribunal discovered that P&ID did not build any GPF, but based its award on a feasibility study, assumptions and pre-contractual works done by P&ID. On the part of the Nigeria Representative, no argument was put forward to mitigate damages. The tribunal arrived at its award upon the assumption that the failed contract went on for the stipulated duration (20 years) without any form of glitch or operational downtime resulting from issues of maintenance.

In the course of the Arbitration Proceedings P&ID claimed the following relief:

Loss of profit for the entire twenty-year term of the GSPA, initial claim been US$1.9 Billion later increased to US$5.9 Billion.

On 31st January 2017, the Arbitral Tribunal gave its final Award against the FGN in the sum of US$6.597 Billion inclusive of pre-award interest at the rate of 7% per annum effective from 20th March 2013 and post-award interest at the same rate till the date of payment. The Nigerian Government contested the Award by attempting to have same nullified. They argued that the dispute was not subject to international arbitration. This position of argument was rejected by the British Court. P&ID, however, has asked the Commercial Court in London to transmute the arbitration into a standing judgement which would ultimately allow them the room to seize international assets belonging to the Federal Government of Nigeria.

How should Nigeria approach settlement with P&ID over $9billion Arbitration Award?

The blame game approach to issues of magnifying consequences must be avoided in the instant scenario. Irrespective of what Government or administration entered into this contract, an alarming Award of $9billion rest uncomfortably on the shoulders of our common purse. Government and successive administrations have more often than not put up an insouciance attitude towards projects not instituted by them. This brings to mind the importance of continuity and implementation of projects of national interest by successive administrations going forward. The need to move expeditiously towards an amicable settlement of the issues at hand cannot be overemphasised. It is advised that going forward, the Federal Ministry of justice must ensure that every Agreement sought to be entered into must be thoroughly reviewed bearing in mind our collective best interest.

P&ID clearly expressed willingness to negotiate the Arbitral Award and the entire deal this is an opportunity for FGN to expedite all necessary action with the best negotiating skills available to ameliorate the position of things and reverse the Award. Firstly the need to secure a stay of execution order is paramount. The FGN can avail itself defences such as Jurisdiction and validity of contract while negotiating the Award.

Credit:

The Appeal on the Process & Industrial Development Limited V. FGN was made available by the Solicitor General of the Federation and Permanent Secretary, Federal Ministry of Justice,

Abuja.

Approved By : Dr. Jennifer Douglas-Abubakar Principal Partner – Miyetti Law